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The 7 Steps Of Consolidating Private Student Loans

By Cornie_Herring : A how to tutorial about private student loan, private student loans, consolidation loan, Finance with step by step guide from Cornie_Herring.

Many students need financial aid to fund their college study as the cost of education can be very expensive. Although applying a scholarship is the first priority for many students, most of them who fail to get one may need to find other financial aids to fund their study. Most scholarships cover the tuition fee, students may need to find other financial aids to cover the rest of costs. they may need to borrow money from other financial sources to pay for the rest of education costs. Students who can't get a scholarship or don't have enough money to support their education costs tend to get the money from private student loans. Generally, private student loans have loosen terms and conditions comparing with scholarship application requirements. So, it is easier to get a private student loan than a scholarship, encouraging students who fail to get a scholarship opt for this option to get a financial aid. Like other personal loan, you need to pay the monthly payment according to the agreement when you signed up the loan. If you pay less than that, the unpaid balance will be charged with interest, snowballing month to month until it hits beyond your financial affordability. Therefore, if you have good credit score and is able to get a loan at low interest rate, you can take advantage of consolidation to combine all private student loans into one account. The 7 steps below will guide you through the process of consolidating private student loans:

Step 1: List all the outstanding private student loans

You have to know the total amount of the students loans you have borrowed and the interest rate of each loan before you can searching for a right loan to consolidate the private student loans. By knowing the status of current private student loans that can be compared with the consolidation package, enabling you to ensure the consolidation works at your advantage. List down all the outstanding balances in the order from largest outstanding amount to the lowest and from the highest interest rate to the lowest rate. Just in case the new loan is not enough to cover all accounts, you should prioritize on the most expensive loans listed on top of the list.

Steps 2: Review the terms of each private student loan

Most private student loans charge pre-payment penalties, but some of them cost very expensive to be settled early. So, you have to review carefully on the terms in the agreement for the private student loans to be consolidated into a new loan to ensure they don't cost you too expensive and you will not pay more compare to before the consolidation. You may need to exclude the private student loans that have expensive pre-payment penalties from your consolidation plan.

Steps 3: Correct errors in your credit report

The higher credit score you have the best chance for you to get the best loan. It also determines how easy your loan will get approved. The credit score is the key measurement for creditors to approve any loan application, so you have to make sure your score truly indicates your credit status. So, you have to make sure your credit reports are clean from any error before submitting a loan application. Any error found in the credit reports should be corrected immediately. You can write-in to credit bureau that issue the report with error to request the error to be corrected.

Steps 4: Define the goals of consolidating private student loans

There are various options for you to consolidate the private student loans. Some options may be better than others depending on your purposes of consolidation. If your income can't afford to cover for the monthly payments of the private student loans, then your aims of consolidating the loans are to get a consolidation loan that is able to reduce the monthly payment and make the loan repayment more affordable. You have to find a consolidation loan with low interest rate and a long repayment period to bring down the monthly payment to a level you are comfortable. But, be aware that you will need to pay more in interest if you choose a long repayment period. Or, you are looking for same saving by locking the interest rate at a fixed low rate and you own a home, then home equity loan will achieve your purpose.

Steps 5: Finalizing the consolidation loan with the most benefits

Once you go through step 4, you should have defined the objectives of consolidating private student loans. By knowing what you want, you can start your searches for the best consolidation loan. There are too many debt consolidation programs available in the market. Most of them are looking good and you may find difficulties to choose among them. To simplify the process, compare them apple to apple in term of interest rate, cost and the benefits, you will find the best one among the good offers.

Steps 6: Contact the lenders in selected list

Don't apply just one loan, you won't be able to consolidate private student loans if the loan gets rejected. So, some for more applications and select the best offer if more than one application gets approved. Next, contact the lenders and let them explain to you how their debt consolidation programs will benefit you. If your credit score is good enough, most lenders will try to secure you as their customer, you may negotiate with them to get some discount on interest rate and waive on some fees.

Steps 7: Review the agreement before accepting the loan

Before you accept an approved consolidation loan, you have to review the fine-print agreement to ensure the terms and conditions are similar to what you have understood. then, use the loan to pay off the private student loans and make the monthly payment on time until it is paid off.

Cornie Herring is a finance expert and author for Visit her website to learn about debt consolidation and find the best debt relief solution to get your finance back to order.

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